The Company’s outstanding long-term debt as of September 30, 2020 (Successor) was recently originated and bears variable interest rates. As a result, the Company believes that the fair value of long-term debt as of September 30, 2020 and December 31, 2019, respectively, approximates its carrying amount. As the fair value estimate of the long-term debt generally requires the use of a discounted cash flow analysis based on current market interest rates for debt issuances with similar remaining years-to-maturity and adjusted for credit risk, the Company concluded that this fair value estimate represents a Level 3 measurement in the fair value hierarchy.

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):

	Balance Sheet	Fair Value Measurements at September 30, 2020 Using								Fair Value Measurements at December 31, 2019 Using
Description	Location	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Derivative financial instruments ⁽¹⁾	Other current assets	$	-	$		$		$		$	250	$	-	$	250	$	-
Derivative financial instruments ⁽¹⁾	Other non-current assets		-		-		-		-		652		-		652		-
Total Assets			-		-		-		-		902		-		902		-

Liabilities:
Derivative financial instruments ⁽¹⁾	Other current liabilities		1,847		-		1,847		-		-		-		-		-
Derivative financial instruments ⁽¹⁾	Other long term liabilities		3,542		-		3,542		-		-		-		-		-
Total Liabilities		$	5,389	$	-	$	5,389	$	-	$	-	$	-	$	-	$	-

Market risk associated with the Company’s long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

The Company assesses whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of its hedged forecasted transactions. The Company uses regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction. The Company classifies derivative instrument cash flows from hedges of benchmark interest rates as operating activities due to the nature of the hedged item. If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings.

The Company monitors concentrations of credit risk associated with financial and other institutions with which the Company conducts significant business. Credit risk, including, but not limited to, counterparty nonperformance under derivatives, is not considered significant, as the Company primarily conducts business with large, well-established financial institutions with which the Company has established relationships, and which have credit risks acceptable to the Company. The Company does not anticipate non-performance by its counterparty. The amount of the Company’s credit risk exposure is equal to the fair value of the derivative when any of the derivatives are in a net gain position.

In September 2019, the Company entered into a floating-to-fixed interest rate swap agreement to make a series of payments based on a fixed interest rate of 1.457% and receive a series of payments based on the greater of 1 Month USD LIBOR or Strike which is used to hedge the Company’s exposure to changes in cash flows associated with its variable rate Term Loan Facilities and has designated this derivative as a cash flow hedge. Both the fixed and floating payment streams are based on a notional amount of $174.7 million at the inception of the contract.

The interest rate swap agreement has a maturity date of September 19, 2024. As of September 30, 2020 and December 31, 2019, the notional amount is $157.2 million and $173.9 million, respectively. There was no ineffectiveness related to the interest rate swaps. The gain or loss on the derivative is recorded as a component of accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. The Company expects to reclassify $1.9 million of income from accumulated other comprehensive income (loss) into interest expense within the next twelve months.

The fair value of the interest rate swap contract is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves. The interest rate swap contract was categorized as Level 2 in the fair value hierarchy. The Company is not required to post cash collateral related to this derivative instrument.

The effect of the interest rate swap contract designated as cash flows hedging instrument on the condensed consolidated financial statements was as follows (in thousands):

Derivative	Amount of Loss Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative						Location of Gain Reclassified From Accumulated Other Comprehensive Income (Loss) into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
	Three months ended September 30, 2020			Nine months ended September 30, 2020				Three months ended September 30, 2020		Nine months ended September 30, 2020
Interest rate swap	$	(126	)	$	(7,179	)	Interest expense	519		$	888
Total	$	(126	)	$	(7,179	)		$	519	$	888

Derivative	Amount of Loss Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative				Location of Gain Reclassified From Accumulated Other Comprehensive Income (Loss) into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Income
	Three months ended September 30, 2019		March 20 to September 30, 2019			Three months ended September 30, 2019			March 20 to September 30, 2019
Interest rate swap	$	88	$	88	Interest expense	$	(35	)	$	(35	)
Total	$	88	$	88		$	(35	)	$	(35	)

During the period from January 1, 2019 to March 19, 2019, the Company did not enter into or transact any derivative contracts designated as cash flows hedges.

Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis

We recognized goodwill impairment charges of $190 million for the two segment reporting units and an impairment charge of $0.7 million for the trade name during the nine months ended September 30, 2020. See “Note 4” – “Goodwill and Other Intangible Assets”. The determination of our reporting units' goodwill and trade name fair values includes numerous assumptions that are subject to various risks and uncertainties.

We applied the income approach to estimate the fair value of the reporting units. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using the company estimate of the discount rate, or expected return, that a market participant would have required as of the valuation date. Significant assumptions in the income approach, all of which are considered Level 3 inputs, include the estimated future net annual cash flows for each reporting unit and the discount rate. The discount rates utilized to value the reporting units were approximately 14% and 12.5%, depending on the risk and uncertainty inherent in the respective reporting unit.

The trade name was valued through application of the relief from royalty method and the significant assumptions used in the valuation are considered Level 3 inputs. Under this method, a royalty rate is applied to the revenues associated with the trade name to capture value associated with use of the name as if licensed. The resulting royalty savings are then discounted to present fair value at rates reflective of the risk and return expectations of the interests to derive its fair value as of the impairment testing date.